Ally Financial (ALLY) Stock Added to Jefferies ‘Franchise Pick’ List

NEW YORK (TheStreet) -- Ally Financial (ALLY) was added to the "Franchise Pick" list at Jefferies.

The firm said it added the auto finance company to this list, as it believes the market under appreciates recent changes in Ally Financial's capital structure.

"We recently raised earnings estimates, and our '16 EPS estimate is now about 6% ahead of a rising consensus. We also note that Ally is likely a beneficiary of macro trends including improvements in wage growth and ongoing strength in auto sales," Jefferies said in an analyst note.

Shares of Ally Financial are down by 0.13% to $23.46 at the start of trading on Friday morning.

Ally Financial is a Detroit, MI.-based bank holding company that operates by offering a variety of financial services.

Separately, TheStreet Ratings team rates ALLY FINANCIAL INC as a Sell with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:

"We rate ALLY FINANCIAL INC (ALLY) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, generally high debt management risk, weak operating cash flow and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The share price of ALLY FINANCIAL INC has not done very well: it is down 5.44% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
  • The debt-to-equity ratio is very high at 4.53 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
  • Net operating cash flow has significantly decreased to $247.00 million or 73.49% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • ALLY FINANCIAL INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ALLY FINANCIAL INC turned its bottom line around by earning $84.79 versus -$457.00 in the prior year. For the next year, the market is expecting a contraction of 97.6% in earnings ($2.01 versus $84.79).
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Consumer Finance industry and the overall market, ALLY FINANCIAL INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: ALLY Ratings Report

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